Court Delivers Victory for Clean Energy

Last Friday, the U.S. Court of Appeals for the Seventh Circuit issued a resounding endorsement of the value of high-voltage transmission needed to bring clean energy to millions of electricity customers. Their forcefully-worded decision barely made a ripple in the media, not even in the environment and energy trade press. But make no mistake, this decision is a major milestone for clean energy and a mortal blow to its entrenched opponents, who saw their entire arsenal of arguments against clean energy infrastructure brushed aside in one motion.

The big issue before the court was whether the Federal Energy Regulatory Commission (FERC) had exceeded its authority in approving plans developed by the Midwest Independent System Operator (MISO) to share the costs of high-voltage transmission upgrades and expansions across a 12-state region of the Midwest. MISO planned the lines, known as “multi-value projects” (MVPs), with the purpose of helping states meet their “renewable portfolio standards” (all MISO states except Kentucky have mandatory or aspirational renewable energy goals on the books).

MISO proposed, and FERC approved, adding a small charge (a “tariff”) to the electric bills of customers throughout MISO to pay for the MVPs. MISO predicted, using extensive economic and technical analysis, that the lines would connect inexpensive wind energy, make the grid more efficient and reliable, and in so doing cut electric bills by two to three times as much as the tariff would increase them.

Writing for the unanimous three-judge panel, Judge Richard Posner, appointed by Ronald Reagan, agreed with MISO (and FERC), and thoroughly rejected the arguments of state regulators and utility companies from Illinois and Michigan. Illinois argued that MISO’s procedures for deciding which transmission lines should be eligible for cost-sharing were too loose, and forced customers to pay for projects from which they did not benefit. Judge Posner blasted Illinois for failing to support its argument and transparently trying to delay urgently needed infrastructure investments:

“Illinois can’t counter FERC without presenting evidence of imbalance of costs and benefits, which it hasn’t done. When we pointed this out at oral argument, Illinois’s lawyer responded that he could not obtain the necessary evidence without pretrial discovery and that FERC had refused to grant his request . . . “

“FERC refused because it already had voluminous evidentiary materials, including MISO’s elaborate quantifications of costs 14 Nos.11-3421, 11-3430, 11-3584, et al. and benefits—and these were materials to which [Illinois] had access as well; they are, after all, members of MISO.”

“The need for discovery has not been shown; and for us to order it without a compelling reason two and a half years after the Commission rendered its exhaustive decision (almost 400 pages long) would create unconscionable regulatory delay.” [emphasis added]

Michigan argued that it could not benefit from new transmission lines for two reasons: (1) state law forbids utilities from using out-of-state renewables to meet the requirement that 10 percent of their power is renewable by 2015; and (2) Michigan draws very little power from the rest of MISO because transmission between Indiana and Michigan is severely limited. Judge Posner had no patience for Michigan’s arguments:

“The second argument founders on the fact that the construction of high-voltage lines from Indiana to Michigan is one of the multi-value projects and will enable more electricity to be transmitted to Michigan at lower cost. Michigan’s first argument—that its law forbids it to credit wind power from out of state against the state’s required use of renewable energy by its utilities—trips over an insurmountable constitutional objection. Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy.”

Since MISO is a voluntary association, Judge Posner pointed out that Michigan can simply leave if they’re being treated unfairly. And if they don’t, then why are they complaining? Judge Posner had no doubt about the real reason:

“[Michigan] doesn’t want to [quit MISO and join PJM]; so far as appears, it is objecting to the MVP program only in the hope of getting better terms.”

The Seventh Circuit goes on to summarily sweep away several lesser arguments made by petitioners:

MISO MVP tariffs violate the Tenth Amendment to the Constitution by invading state prerogatives.

Seventh Circuit: “The [issue] is frivolous…it’s not as if FERC were ordering states to build transmission lines that the federal government wants to use for its own purposes.”

MISO should allocate costs on the basis of peak load instead of using total electricity consumption.

Seventh Circuit: “… a primary goal of the MVPs is to increase the supply of wind-powered energy … the states’ renewable energy standards are couched in terms of total energy rather than peak load … long-distance power transmission will enable fewer power plants to serve the grid’s off-peak demand … MISO and FERC were entitled to conclude that the benefits of more and cheaper wind power predominate over the benefits of greater reliability brought about by improvement in meeting peak demand.”

MISO should allocate some of the costs to power plants (e.g wind farms) rather than entirely to wholesale buyers of the power (utilities).

Seventh Circuit: “… the utilities benefit from cheaper power generated by efficiently sited wind farms whose development the multi-value projects will stimulate.”

Judge Posner did disagree with FERC on one issue – but again to the benefit of clean energy infrastructure. Posner said FERC could not prohibit MISO from adding an MVP surcharge on electricity exported from MISO to the neighboring regional transmission operator, PJM. What this means is that ratepayers in PJM who benefit from the MVP lines in MISO will also have to chip in to cover their costs.

Having had their day in court, the utilities standing in the way of developing America’s vast renewable energy resources have been rebuffed and had their true motivations exposed. Further delay in building the transmission needed to tap these clean domestic resources, sufficient to power the entire country dozens of times over – would be in the words of the Seventh Circuit “unconscionable.” We couldn’t agree more.